Philippine Deposit Insurance Corporation (PDIC) General Counsel Romeo M. Mendoza, Jr. said that the PDIC is taking a conservative and prudent approach in looking into the limitations of the deposit secrecy law but is initiating alternative course of actions to build strong cases against officials of the Legacy affiliated banks who are responsible for the failure of said banks.

While the deposit secrecy law (Republic Act 1405) allows PDIC to examine deposit accounts preparatory to the payout of deposit insurance claims, the same law prohibits the state deposit insurer from sharing its findings with other regulators.

Mendoza explained that there are two schools of thoughts on the applicability of the deposit secrecy law on closed banks. The more aggressive interpretation is that the deposit secrecy law does not cover closed banks hence, PDIC may disclose deposit account information to other regulatory agencies and third parties. A more conservative interpretation is that the deposit secrecy law is a special law declaring all deposits to be "absolutely confidential". The only exceptions allowed are: "upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court x x x, or in cases where the money deposited or invested is the subject matter of the litigation."

The PDIC General Counsel said, "Contrary to allegations of stonewalling and foot dragging, PDIC has chosen to take the conservative approach to ensure that the cases PDIC will be filing soon will not be dismissed due to technicalities arising from differing interpretations of the deposit secrecy law. This has consistently been the position of the PDIC legal sector regarding cases involving deposit records."

Mendoza also said, "The deposit secrecy law is not necessarily an impediment for BSP to pursue its Legacy investigations." Among others, PDIC has suggested to BSP, through the Financial Sector Forum (FSF) Interagency Task Force recently formed to coordinate the investigations and filing of cases, that BSP file their cases and cause the issuance of subpoena for PDIC to produce the deposit information it requires. Another option is for the PDIC Board of Directors to appoint and deputize BSP investigators to join PDIC in the investigation of deposit accounts. Finally, PDIC also suggested the joint filing of cases by BSP and PDIC.

PDIC had earlier initiated the establishment of an Interagency Task Force under the auspices of the FSF, where BSP and the Securities and Exchange Commission (SEC) are also members. This Task Force was created to coordinate the investigative efforts of BSP, SEC and PDIC, share significant findings, and develop strong cases against responsible and culpable officials of the Legacy group. The Legacy group is composed of banks, financial institutions and pre-need firms.

"The idea is for the efforts of government regulators to be well coordinated and not to be stalled by limitations or restrictions of laws. These should not get in the way of government’s efforts to build strong cases to prosecute the perpetrators of the scam that caused these bank failures," Mendoza said.

The failure of the Legacy affiliated banks is estimated to hit PDIC’s Deposit Insurance Fund (DIF) to the tune of P14.4 billion. "PDIC will pay only the valid deposit insurance claims. The DIF is sufficient but we have to ensure that it is protected by paying only the valid deposit insurance claims", the PDIC General Counsel added.